Meaning

A cash flow statement is a statement prepared to show the changes in the historical position of cash and cash equivalents from operating activities, investing activities and financial activities, over an accounting year.

Accounting Standard- 3 (AS-3) issued by Institute of Chartered Accountants of India (ICAI), makes it compulsory for all listed companies to prepare and present Cash Flow Statement along with other financial statements.

Cash and cash equivalents:

Cash means cash balance and bank balance(less Bank overdraft if any).

Cash equivalents means Marketable securities having a maturity period of equal to or less than three months e.g. treasury bills, commercial papers, money market funds etc.

Cash Flows mean cash inflows/ cash outflows. There can be cash inflow or cash outflow from operating activities, investing activities and/or financing activities.

Operating activities mean principal revenue producing activities of the business.

Investing activities mean the activities relating to acquisition (purchase) and disposal (sale) of long term assets.

Financing activities mean the activities affecting the size and composition of capital structure i.e. the Debt and Equity of the company.

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